Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Define fungibility, and explain why it matters in financial decision
making.
Expert Solution
Step 1
Fungibility: Something which is fungible is easily substitutable or exchangeable. Fungibility exists in many widely traded commodities. A tonne of copper or a barrel of oil may be substituted for another tonne of copper or another barrel of oil. Money is the clearest definition of a fungible entity. A dollar is a dollar, whether it was given to you, found on the street, or won by hard work. Whether that's a dollar bill in the pocket, 20 nickels in a jar of spare change, or even a number on the computer while checking the bank balance online, a dollar is a dollar. It's just worth the same. Money has the feature of being fungible.
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